"An agreement to avert the fiscal cliff before year-end remains our central assumption, though it continues to look like a fairly close call given the political obstacles to a deal," said Goldman Sachs economists in a morning note. "If a deal is reached, we would expect a tax increase of a magnitude similar to the upper income tax cuts, though the composition might differ. Entitlement reforms also seem likely to be part of a package, particularly related to health programs. 'Downpayments' in both areas seem likely, with additional deficit reduction to be enacted in 2013 as part of a two-stage process."

The working deadline for an agreement, according to the Goldman Sachs economists, appears to be Dec. 21.

"While talks are ongoing, we would not expect serious negotiations to begin for another couple of weeks. In the interim, headlines out of Washington are likely to be mixed, but we would expect more negative than positive news until at least mid-December," the economists noted.

The Census Bureau reported Tuesday that durable goods orders were unchanged in October after a prior downwardly revised gain of 9.2% in September. Excluding the transportation component, orders rose 1.5%, compared with a downwardly revised increase of 1.7% the previous month.

Economists, on average, had expected orders to fall 0.6% in October and decline 0.5%, excluding transportation.

"Overall sales had been hampered by the impact of the recession gripping the eurozone while of course fears over what is on the other side of the fiscal cliff," said Andrew Wilkinson, chief economic strategist at Miller Tabak. "The report appears pretty encouraging given the nature of the rebound in orders outside of the transport sector, while demand for capital goods also surged. The minor downwards revisions will likely be overlooked in the face of strengthening orders in September."

The S&P Case-Shiller 20-city home price index showed a gain of 3% year over year in September after the prior month's rise of 2%. Economists were expecting a 2.9% year-on-year increase in September.

At 10 a.m., the Conference Board's read on consumer confidence for November is expected to show an increase to 73 from 72.2.